Volkswagen's main brand swings to €127m loss in fourth quarter after emissions scandal

Volkswagen's VW brand swung to a loss in the fourth quarter.Getty Images

German car giant Volkswagen said its biggest brand tumbled to a fourth quarter loss, as the compensation costs and the tarnished reputation following the emissions scandal hit the company hard.

In the final three months of 2015, the VW brand swung to a €127m (£98.8m, $144m) loss compared with a €780m profit recorded in the corresponding period in the previous year. The car maker said its biggest division was hit by "market support measures linked to the emissions issue" as well as by weakening demand in Russia and Brazil.

The German car manufacturer reported a €3.48bn (£2.5bn, $3.8bn) loss as a result of the emission scandal as it was found around 11 million cars had been impacted worldwide. The car maker booked a €16.4bn last year as a result of the emissions-manipulation scandal, provisions to recall cars with potentially faulty air bags from its North American market and restructuring plans in South America.

"Volkswagen is far more than crisis," group chief executive Matthias Mueller told investors on Thursday (28 April). "But we can nonetheless hardly avoid saying that the current situation demands everything of us, in every respect, including financially."

Herbert Diess, the head of the VW division who joined from BMW in July, said it is vital for the German group to turn the fortunes of its brand around, particularly as it was struggling to be profitable even before the emission scandal.

Diess said the company had been slow to address the decline in sales of its namesake brand, opting instead to rely on booming demand in China and sales of other brands such as Porsche and Audi. In 2015, the VW division posted a margin of 2%, down from 2.5% in the previous year a third of the pre-crisis target for operating profit to rise to 6% of sales.

The group said it plans to achieve a margin of between 5.5% and 6.5% for its car units and between 5% and 6% for the whole company in the current financial year.